 Is the labor wedge due to rigid wages? Evidence from the self-employedJournal of Macroeconomics, 2018, vol. 55, issue C, 184-198 Abstract: A central goal of labor economics is explaining cyclical variation in hours worked. Procyclical hours can always be explained in a market clearing model with a residual tax wedge, the “labor wedge.” Convincing progress has been made in reducing the cyclical volatility in the labor wedge and therefore explaining movements in hours worked by amplifying technology shocks with endogenously rigid wages [Hall, R. E., 2005. Employment Fluctuations with Equilibrium Wage Stickiness. American Economic Review 95 (1), 50–65.],[Shimer, R., 2010. Labor Markets and Business Cycles. Number 9217 in Economics Books, Princeton University Press.], and rigid wages in general. This paper demonstrates that the cyclical component of labor hours for the self-employed, who are not vulnerable to such frictions, is of comparable cyclicality and volatility as the cyclical component of labor hours for wage and salary workers, even conditioning on wages, consumption, and occupation-industry composition. This finding suggests that explaining the labor hours of the self-employed presents a new test for amplification mechanisms. Keywords: Self-employment; Labor wedge; Business cycles; Labor markets (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:55:y:2018:i:c:p:184-198 DOI: 10.1016/j.jmacro.2017.10.003 Access Statistics for this article Journal of Macroeconomics is currently edited by Douglas McMillin and Theodore Palivos More articles in Journal of Macroeconomics from Elsevier |
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